Moody's pegs FY15 growth at 5.5% on poll-related reform delays

Updated: Monday, February 24, 2014, 15:25 [IST]

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Stating that the forthcoming elections will delay the reform process and hurt growth, international rating agency Moody's today said it expects growth to pick up to only 5.5 per cent in FY15. "We expect GDP growth to remain weak at 5.5 per cent in FY15 as the elections will delay reforms needed to revive growth," it said in a note. Growth has been below the trend for much of FY14 and the government's official estimate pegs it at 4.9 per cent, a bit higher than 4.5 per cent achieved in FY13. Elections are scheduled for April-May.

It said interest rates will continue to remain high and hence the rupee will continue to be volatile, making it difficult for importers and exporters. The agency also gave a negative outlook for non-financial corporates in 2014 on weak economy, political uncertainty and effects of the US Fed's tapering. "Lower economic growth, volatile exchange rates, rising borrowing costs and slow economic reforms have dampened prospects across many sectors," it said in the report prepared with its local counterpart Icra. It specifically said domestically focused sectors like real estate, cement, automotive, steel, metals and mining, and retail which are dependent on "vagaries of regulation and policy-setting" have negative outlooks.

Others like exploration and production, IT/business process outsourcing and pharma which are linked to developments in the external sector are comparatively better placed, it said. The report said pharma segment will benefit from patent expiries in the US and gave a stable outlook for the sector. For the telecom sector also it gave a stable outlook, saying earnings will improve on the back of consolidation and improved pricing power with operators. However, the entry of Mukesh Ambani-led Reliance Jio can temper the trend, it cautioned.